High street supplier and sourcing firm PDS Multinational is poised to open two new state-of-the-art factories in Bangladesh to take more control over its supply chain
Pallak Seth is a difficult man to pin down. He rarely appears in the press and travels between 10 and 12 days a month, but the vice-chairman and founder of international fashion manufacturing and sourcing firm PDS Multinational has his finger firmly on the pulse of the UK fashion industry.
India-born, UK-based Seth founded the business aged 21 with the launch of his apparel manufacturing business Norwest Industries in Hong Kong in 1999 and has since expanded to 31 sales and sourcing offices in 18 countries, creating a global supply chain management conglomerate. For the financial year 2017/18, it projects a turnover of more than $1bn (£800m). The company does not reveal profits.
Around 90% of what we sell is designed by us
Poeticgem International, which may be PDS Multinational’s best-known subsidiary in the UK, supplies retailers including Asda’s George, Tesco’s F&F, Sainsbury’s Tu, Next, Inditex, C&A and Pep & Co. But the group has around 40 business units under the holding company PDS, spanning operations in Bangladesh, China, Hong Kong, Sri Lanka, Pakistan, Chile, Germany, Spain, Turkey, India and Australia.
The company prides itself on its design expertise and market intelligence. It employs 150 designers and product development specialists, who create around 10,000 new styles every month.
“Around 90% of what we sell is designed by us,” explains Seth.
When we meet at Poeticgem’s head office in Watford, Hertfordshire, he is torn. As a naturally modest man with a business that traditionally goes under the radar, Seth is reluctant to put himself in the spotlight. But he does want to talk about his latest venture: the group’s first significant entry into own manufacturing with the launch of two state-of-the-art facilities in Bangladesh, supported by a total investment of $25m (£20m).
PDS currently works with around 200 partner factories to deliver more than 1 million units a day to its 190-plus retail customers. It also established its own manufacturing facility in Sri Lanka two years ago to make babywear.
The factories will be fully air conditioned. They will have LEED certification and the wash plants will be completely green
The Sri Lankan site is much smaller than the ambitious Bangladesh projects, employing around 500 people compared with around 8,000 at the two new factories, but it did set a blueprint for the group’s entry into own manufacturing. Seth says the new ventures will not replace its existing partner set-up but, rather, aims to add an incremental 20% to top line sales. PDS has invested in many of its partner factories along the way and welcomes the flexibility the network gives to its supply chain.
“The idea behind setting up our own factories was twofold,” explains Seth. “First, to improve the credibility of our group by showing our customers how serious we are about our business and how we are investing further. And second, a lot of customers today only want to work with manufacturing groups, rather than sourcing firms, so we can attract new customers, particularly US ones.”
Home from home
The Progress Apparels factory is set to launch commercial production next month, with a 400,000 sq ft facility in the Adamjee Export Processing Zone in Narayanganj, set to employ 5,000 people across 2,500 machines and 50 lines producing schoolwear, formal trousers, casual trousers, denim, casual jackets and swim shorts.
“The factory is located two hours from the Bangladesh capital of Dhaka in a more rural area, which is bringing employment back to the villages giving workers jobs closer to their homes,” he says.
“At full capacity, this factory will make around 15 million units a year but it will be a phased launch over the next year, with us adding new lines every three months so by April 2018, we will be fully up and running.”
He says the facility is based on a campus model, with canteen facilities and creches for the workers’ children.
“In Bangladesh, there are around 5,000 factories but the kind of factories we are setting up will be in the top 50 in the country,” he says. “It will be really state of the art but also very cost effective because we are implementing lean manufacturing [efficiency] principles and making sure the worker/machine ratio is under control from day one.
“The factories will be fully air conditioned. They will have LEED (Leadership in Energy and Environmental Design) certification and the wash plants will be completely green. We have engaged Accord and Alliance in Bangladesh and we are hoping that by the time the plants are set up we will get 100% marks on this.” The Accord on Fire and Building Safety in Bangladesh and the Alliance for Bangladesh Worker Safety are independent programmes aimed at improving worker conditions and safety in the country.
Seth says word has spread among workers in Bangladesh about the new factories and the firm is currently getting four applications for every one job: “A lot of people want to move back from the city to the villages and working conditions in the Bangladesh domestic industry can be horrible so as soon as you have these kind of state-of-the-art factories, everyone wants to work there. They will get paid on time and receive good benefits.”
The second factory, in Gazipur, is Green Smart Shirts, which will offer 250,000 sq ft of space on a 6 acre compound to employ 3,000 people across 1,500 machines and 30 lines producing formal and casual shirts for men, women’s blouses, and shirts for boys and girls.
The site will produce close to 7 million pieces annually and will be operational in May this year.
Matalan is one of the leading brands that is working with PDS to start production immediately, based on a close relationship developed over more than 20 years. The partnership gives Matalan more control and transparency over production, while allowing PDS to get production going right away.
“A new factory often has to start producing for the local market, or for Indian or Middle Eastern retailers, to get going, but by having the factories working with a western retailer from day one, we will be up to a high standard straight away,” he says.
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Sourcing from Bangladesh has been a source of concern for many brands and retailers of late. Issues surrounding workers’ rights were thrown into the spotlight following a series of strikes and arrests over low pay and poor working conditions pay at the end of last year. At the Dhaka Apparel Summit held in February, industry organisations, government bodies and retailers discussed a pathway for change, but the country’s reputation remains under pressure.
The boss of a rival high street supplier pointed to particular challenges of manufacturing in the country, explaining that: “Retailers are making more demands about what they expect, but they don’t want to pay any more to support or change that, which must be having an effect”.
We follow some of the most stringent standards in the apparel sourcing and manufacturing industry
But Seth maintains that its network of partner factories are audited every three to six months and if the firm finds any concerns, they will be addressed immediately: “We don’t let it get to a stage where it can be a problem.”
He prides himself on the ethical standards the firm upholds, explaining that the structure of the group – PDS, rather than the subsidiaries, handles all audit and compliance – makes for a more stringent approach too.
He explains: “Compliance [teams] report to the board, rather than the individual business heads, because they could make a short-term decision thinking, ‘What do I need to do to get that order?’ but we are always thinking of the longer term.
“Because we work with almost 200 retailers, some have very high ethical compliance standards but others don’t. Irrespective of what customers want, we still follow some of the most stringent standards in the apparel sourcing and manufacturing industry, which protects our brand reputation around the world.”
It is an approach that seems to be working, as PDS’s customer list reads like a directory of all the biggest retailers in the value to mid-market sector in the UK and Europe.
The sourcing director of one multiple says his relationship with Seth is based on trust, which has been built up over more than 14 years: “We work closely together. Pallak is very modest and has a caring nature. We have healthy challenges, but it is a case of mutual trust.”
Another buying and sourcing director at a high street retailer, who did not wish to be named, agrees, describing Pallak as running “a very professional organisation that is great to work with.”
Esra Ercan is managing director at Spring Near East Sourcing and Manufacturing, a PDS-owned subsidiary that was founded in Turkey in 2011 to offer a quick-response sourcing solution and has since grown into a $120m (£96m)-turnover business. She was previously general manager for the European hubs (Turkey, Egypt, Italy, Prague and Krakow) at Tesco International Sourcing and had met Seth a handful of times before they started working together.
We have not really pushed hard in the US market yet, but that is the next phase of the company
She says he is a man of his word, which is why his relationships have been so longstanding: “Once he trusts people, he doesn’t interfere and he lets you fly with your own wings,” she says. “He is a visionary with an entrepreneurial mindset.”
PDS currently makes around a third of its total sales within the UK. Europe makes up a similar amount and the balance comes from the rest of the world, predominantly Australia, Canada, the US and the Middle East.
“We have not really pushed hard in the US market yet, but that is the next phase of the company,” says Seth.
He says the company benefits from retailers wanting to consolidate their supply chains and work with fewer sourcing and manufacturing firms to eliminate complexity and aid transparency. Consequently he believes the firm is on track to increase turnover by 20% in the year ahead and could double its size to a $2bn (£1.6bn) company by 2022, based on the investment in manufacturing and consolidation in the marketplace.
Exchange rates, tough trading conditions and a shift in consumer spending are, of course, putting pressure on margins, but Seth believes the firm is gaining business in this new environment.
“Before, retailers were quite set in their sourcing base, but when the pressure comes on margins, they open up costing lines to new suppliers, so we are gaining business in this whole environment,” he says. “The approach we are taking is that we don’t want to lose business because of price, so we must remain competitive, and keep hold of our volume and market share.
“Many customers today are struggling on credit. With our financial strength, we can give long payment terms to our customers as long as they pass insurance,” he explains.
And it is with a strong balance sheet, an entrepreneurial spirit and a new manufacturing division that Seth is looking to the next period of growth for PDS Multinational. But don’t expect to hear much about it as the youthful, enigmatic boss will be looking to stay behind the scenes once again.